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Corruption as an Alternative to Limit Pricing

Author

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  • Raluca Elena Buia

    (Department of Economics, University Of Venice C� Foscari)

Abstract

We explore to what extent bribery can be an alternative way of fighting rivals� entry on the market when there is uncertainty about the degree of corruption in the public sector. For high levels of corruption, �covert� fight through bribery is the optimal choice of an incumbent. For low degree of corruption, instead, the incumbent prefers to act strategically but overtly by playing a limit pricing game.

Suggested Citation

  • Raluca Elena Buia, 2011. "Corruption as an Alternative to Limit Pricing," Working Papers 2011_02, Department of Economics, University of Venice "Ca' Foscari".
  • Handle: RePEc:ven:wpaper:2011_02
    as

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    References listed on IDEAS

    as
    1. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March.
    2. Vito Tanzi, 1998. "Corruption Around the World: Causes, Consequences, Scope, and Cures," IMF Staff Papers, Palgrave Macmillan, vol. 45(4), pages 559-594, December.
    3. Mr. Vito Tanzi, 1998. "Corruption Around the World: Causes, Consequences, Scope, and Cures," IMF Working Papers 1998/063, International Monetary Fund.
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    More about this item

    Keywords

    Corruption; Bribery; Production licence; Moral cost; Covert/overt fight;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H40 - Public Economics - - Publicly Provided Goods - - - General

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